A fire destroyed the warehouse of Reed Enterprises, on August 31, 20Y1. The books and records of Reed showed the following information on that date. Merchandise Inventory. Jan. 1, 20Y1 $600,000 Purchases to date 990,000 Freight - In 30,000 Sales to date $2,400,000The gross profit ratio has averaged 60 % of sales for the past six years. Required: Use the gross profit method to estimate the cost of inventory destroyed by fire. Group of answer choices $660,000 $1,590,000 $1,620,000 $960,000

A fire destroyed the warehouse of Reed Enterprises, on August 31, 20Y1. The books and records of Reed showed the following information on that date. Merchandise Inventory. Jan. 1, 20Y1 $600,000 Purchases to date 990,000 Freight - In 30,000 Sales to date $2,400,000The gross profit ratio has averaged 60 % of sales for the past six years. Required: Use the gross profit method to estimate the cost of inventory destroyed by fire. Group of answer choices $660,000 $1,590,000 $1,620,000 $960,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Wormold Industries suffered a fire in its warehouse on March 4, 2021. The warehouse was fullof finished goods, and after reviewing the damage, management determined that inventory,with a retail selling price of $90,000, was not damaged by the fire.For the period from January 1, 2021, to March 4, 2021, accounting records showed thefollowing: Purchases $650,000Purchase returns 16,000Sales revenue 955,000 The inventory balance on January 1, 2021, was $275,000, and the company has historicallyearned a gross profit percentage of 35%.Required: Use the gross profit method to determine the cost of inventory damaged by the fire.
Shamrock Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following. Beginning inventory $180,800 Sales revenue $662,500 Purchases for the year 361,100 Sales returns 24,600 Purchase returns 27,100 Rate of gross profit on net sales 30 % Merchandise with a selling price of $20,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,500 had a net realizable value of $5,600. Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage. Amount of the loss $ 479,300
On April 10, 2023, a fire damaged the office and warehouse of Sill Company. Most of the accounting records were destroyed, but the following account balances were determined as of March 31, 2023: Sales Revenue (January 1-March 31, 2023), $180,000; Purchases (January 1- March 31, 2023), $94,000. The company's fiscal year ends on December 31. It uses a periodic inventory system. From an analysis of the April bank statement, you discover cancelled checks of $4,200 for cash purchases during the period April 1-10. Deposits during the same period totaled $18,500. Of that amount, 60% were collections on accounts receivable related to sales made in prior periods, and the balance was cash sales. Correspondence with the company's principal suppliers revealed $12,400 of purchases on account from April 1 to April 10. Of that amount, $1,600 was for merchandise in transit on April 10 that was shipped FOB destination. Correspondence with the company's principal customers produced acknowledgments of…
Blue Corporation's April 30 inventory was destroyed by fire. January 1 inventory was $155,000, and purchases for January through April totaled $467,300. Sales revenue for the same period was $684,500. Blue's normal gross profit percentage is 25% on sales. Using the gross profit method, estimate Blue's April 30 inventory that was destroyed by fire. Estimated ending inventory destroyed in fire $
On September 22, 2018, a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following information is available from the records of the company's periodic inventory system: Inventory, Jamuary 1, 2018 Net purchases, January 1 through September 22 Net sales, January 1 through Septenber 22 Gross profit ratio $144, 000 374, 000 570, 000 30% Required: Complete the below table to estimate the cost of inventory destroyed in the flood using the gross profit method. Beginning inventory Plus: Net purchases Cost of goods available for sale Less: Cost of goods sold: Net sales Less: Estimated gross profit Estimated cost of goods sold Estimated cost of inventory destroyed
Muller Computers stores its inventory in a warehouse that burned to the ground in late November, 2018. Their sales office was at a different location. In order to file a claim with their insurance, the owners ask you to estimate the inventory that was in the warehouse. The following information is available: Beginning Inventory 375,000 Purchases through November 30 470,250 Net sales revenue through november 30 793,000 The company's gross profit has historically been 40% of net sales revenue. Estimate the value of the inventory destroyed in the fire using the gross profit method. a.$528,550 b.$388,450 c.$369,950 d.$410,000
19.Your review of ABC Company's inventory and related records for the year revealed the following information:Inventory, 1/1 - 450,000Purchases -3,150,000Sales -4,200,000You conducted a physical inventory on December 31 and determined P450,000 was in the company's warehouse. The management suspects some new employees may have pilfered a portion of the merchandise inventory.What is the cost of the missing inventory assuming that ABC's gross profit remains at 30% of sales?
What did i do wrong in my calculations? On November 21, 2021, a fire at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $18,000. The following information was available from the records of Hodge’s periodic inventory system: Inventory, November 1 $ 130,000 Net purchases from November 1, to the date of the fire 146,000 Net sales from November 1, to the date of the fire 226,000 Based on recent history, Hodge’s gross profit ratio on Product Tex is 30% of net sales. Required:Calculate the estimated loss on the inventory from the fire, using the gross profit method. $134,200
A fire destroyed a warehouse of the Goren Group, Incorporated, on May 4, 2024. Accounting records on that date indicated the following: Merchandise inventory, January 1, 2024 Purchases to date Freight-in Sales to date $ 1,940,000 5,840,000 Estimated loss from fire 440,000 8,600,000 The gross profit ratio has averaged 20% of sales for the past four years. Required: Use the gross profit method to estimate the cost of the inventory destroyed in the fire.
On November 21, 2024, a fire at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $26,000. The following information was available from the records of Hodge’s periodic inventory system: Inventory, November 1, 2024 $ 170,000 Net purchases from November 1, to the date of the fire 154,000 Net sales from November 1, to the date of the fire 234,000 Based on recent history, Hodge’s gross profit ratio on Product Tex is 40% of net sales. Required: Calculate the estimated loss on the inventory from the fire, using the gross profit method.
Blossom Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following. Beginning inventory Purchases for the year Purchase returns $168,500 Amount of the loss 412,700 30,100 Sales revenue Sales returns Rate of gross profit on net sales $628,200 25,600 20 % Merchandise with a selling price of $20,300 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,200 had a net realizable value of $5,200. Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage.
On June 30, 2021, a fire at Norjanna Company’s only warehouse caused severe damage to itsinventory. Based on recent history, Norjanna has a gross profit of 25% on cost. The followinginformation is available from the records for the six months ended June 30, 2021:Inventory – January 1 4,000,000Net purchases 18,000,000Net sales 20,000,000A physical inventory disclosed undamaged goods with selling price of P1,000,000. On June 30, 2021,unsold goods on consignment with selling price of P1,500,000 are in the hands of the consignee. Whatis the estimated cost of inventory destroyed by fire? Judy Company uses the retail inventory method to approximate its ending inventory. The followinginformation is available for the current year: Cost RetailBeginning inventory 650,000 1,200,000Purchases…